LONDON, Oct 24 (Reuters) - Gold prices hovered near a seven-week low on Wednesday as a weak reading of the German economy lifted the dollar versus the euro, while dealers awaited the U.S. Federal Reserve's policy statement later in the day.

Pressure from the dollar helped keep prices near Tuesday's seven-week low of $1,703.50 per ounce, putting it on track to decline in October for the first month in five.

Spot gold was at $1,708.90 an ounce at 1023 GMT against $1,708.09 late in New York on Tuesday, while U.S. gold futures for December delivery were up 30 cents an ounce at $1,709.70.

Gold has lost momentum after failing to break through the psychologically important $1,800 an ounce level earlier this month. It hit a 2012 high on Oct. 5 at $1,795.69 after the Federal Reserve unveiled a third round of quantitative easing measures to stimulate growth.

``I think we're going to have another test on the downside. The market is still quite heavily long, especially on the Commitment of Traders,'' Jeremy East, head of trading at Standard Chartered said, referring to a report released Friday, which showed bets on rising prices were still at elevated levels.

Investors are awaiting the outcome of a two-day Federal Reserve meeting in Washington on Wednesday. While the Fed is not expected to add to last month's stimulus pledge, its comments will be closely watched for clues on policy direction.

Dealers are focusing on the likely outcomes for the gold price from the U.S. election on Nov. 6, with some seeing a possible Mitt Romney victory as signalling an earlier exit from the Fed's money-printing strategy and a lower gold price.

Opinion polls are neck and neck between Romney and President Barack Obama.

Dealers are also focused on the level of demand for gold from top consumer India, particularly during its festival season which peaks with Diwali next month. A strengthening of the rupee could lead to a pick-up in gold demand after a subdued year so far.

From a technical perspective, analysts who study past price patterns for clues on the next direction of trade flag up support at the key psychological level of $1,700 an ounce.

``The next level of support after that is $1,660 an ounce, which coincides with gold prices before Fed Chairmen Ben Bernanke's speech on economic policy at a Jackson Hole, Wyoming, summit on 31 August,'' HSBC said in a note.

``We continue to see modest pressure on gold prices in the near term, barring any surprise announcements by the FOMC for additional monetary easing policies.''

In South Africa, which has been hit by a wave of violence linked to labour unrest this year, Gold Fields said late on Tuesday it had sacked 8,500 wildcat strikers after they ignored an ultimatum to return to work or face dismissal.

Silver was up 0.8 percent at $31.90 an ounce, while spot platinum was flat at $1,568.99 an ounce and spot palladium was up 0.8 percent at $596.10 an ounce.

Palladium outperformed platinum after falling nearly 5 percent on Tuesday, posting its biggest one-day price drop since March, though it remained near two-month lows.

The metal has suffered along with other industrial commodities this year from perceptions that the global economy is struggling for growth.